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Why Lululemon Athletica Stock Gained 12% in April

By Demitri Kalogeropoulos - Updated May 4, 2018 at 1:52PM

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Investors bid shares higher in the wake of the retailer's strong first-quarter report.

What happened

Yoga clothing retailer Lululemon Athletica (LULU 1.96%) gained 12% last month, compared to a slight increase in the S&P 500, according to data provided by S&P Global Market Intelligence.

^SPX Chart

^SPX data by YCharts.

The growth added to a sharp rally for long-term investors, who've seen their shares rise by over 80% in the last year, compared to an 11% gain for the broader market.

So what

Lululemon's April spike came as investors continued to grow more optimistic about the business in light of its positive operating momentum. The retailer said in late March that sales rose 2% at its physical locations and improved by 12% after accounting for its surging online business. Lululemon is having no trouble convincing shoppers to pay full price for its products, either. Gross profit margin rose by 2 full percentage points to reach 56.3% of sales.

A woman doing yoga.

Image source: Getty Images.

Investors sent the stock higher by 11% in the days following that late-March report, and the rally continued into April.

Now what

The retailer is searching for a CEO following the abrupt resignation of Laurent Potdevin. Yet the new leader will take over under ideal circumstances. Lululemon is expecting sales to rise in the mid-to-high single digits in 2018, while earnings per share jump to between $3 and $3.08, up from $2.59 last year.

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